Dillard's 2012 Annual Report Download - page 23

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
EXECUTIVE OVERVIEW
Dillard’s, Inc. operates 302 retail department stores spanning 29 states and an Internet store. Our
retail stores are located in fashion-oriented shopping malls and open-air centers and offer a broad
selection of fashion apparel, cosmetics and home furnishings. We offer an appealing and attractive
assortment of merchandise to our customers at a fair price, including national brand merchandise as
well as our exclusive brand merchandise. We seek to enhance our income by maximizing the sale of this
merchandise to our customers by promoting and advertising our merchandise and by making our stores
an attractive and convenient place for our customers to shop.
The Company also operates CDI, a general contractor whose business includes constructing and
remodeling stores for the Company, which is a reportable segment separate from our retail operations.
In accordance with the National Retail Federation fiscal reporting calendar, the fiscal 2012
reporting period presented and discussed below ended February 2, 2013 and contained 53 weeks. The
fiscal 2011 and 2010 reporting periods presented and discussed below ended January 28, 2012 and
January 29, 2011, respectively, and each contained 52 weeks. For comparability purposes, where noted,
some of the information discussed below is based upon comparison of the 52 weeks ended February 2,
2013 to the 52 weeks ended February 4, 2012.
Fiscal 2012
Our operating performance continued to improve during fiscal 2012. Retail sales were higher than
last year, as we ended the year with our 10th consecutive quarter of comparable store sales increases.
Gross margin improved over last year, mainly from progress in the second half of the year, and
operating spending was leveraged. We repurchased $185.5 million, or 2.8 million shares, of our Class A
Common Stock during the year. Net income was $336.0 million, or $6.87 per share, for the year, and
operating cash flow increased $21.6 million over last year, further enabling the Company to return
$252.3 million of dividends to our shareholders, including a special dividend of $5.00 per share.
Included in net income for fiscal 2012 are:
• an $11.4 million pretax gain ($7.4 million after tax or $0.15 per share) related to the sale of
three former retail store locations.
• a $1.6 million pretax charge ($1.0 million after tax or $0.02 per share) for asset impairment and
store closing charges related to the write-down of a property held for sale and of an operating
property.
• a $1.7 million income tax benefit ($0.03 per share) due to a reversal of a valuation allowance
related to a deferred tax asset consisting of a capital loss carryforward.
• an $18.1 million income tax benefit ($0.37 per share) due to a one-time deduction related to
dividends paid to the Dillard’s, Inc. Investment and Employee Stock Ownership Plan.
Included in net income of $463.9 million ($8.52 per share) for fiscal 2011 are:
• a $201.6 million income tax benefit ($3.70 per share) due to a reversal of a valuation allowance
related to the amount of the capital loss carryforward used to offset the capital gain income
recognized on the taxable transfer of properties to our REIT.
• a $44.5 million pretax gain ($28.7 million after tax or $0.53 per share), net of settlement related
expenses, related to the settlement of a lawsuit with JDA Software Group for $57.0 million.
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